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Sunday, December 30, 2007
The Need for a Structured Trading MethodSuccess in Forex requires a systematic way of making trading decisions. I have traded Forex for 25 years, first as a bank trader, and later as an independent trader with my own trading portfolio. As an independent trader I have had to develop methods to manage my market exposure and control my trading risk without the support of a trading team.These two challenges led me to Technical Analysis -- the study of the relationship of indicator and/or price patterns and price movement. A basic premise of T.A. is that "history repeats itself". Most technical analysts look for repetitive price or indicator patterns on currency price charts. Patterns that anticipate price movement. The assumption is that when a recognized, repetitive pattern appears it will likely precede a certain associated price movement, thus giving the trader the information he/she needs to place a successful trade. With Technical Analysis I began to develop an objective method for getting into and out of currency positions.To consistently make money in the Forex market you want to have a set of trading rules that you follow. This will separate you from the market gamblers and give you the structure to become a professional trader.Without a set of trading rules it is difficult to repeat successful trades on a consistent basis. If you can identify market conditions associated with winning trades, find a way to describe them, and quantify and test out your theories then you will have the opportunity to build on your previous success.
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